Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-1 Chapter 14 Foundations of Organizational Structure

Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-1

Chapter 14

Foundations of Organizational Structure


After studying this chapter, you should be able to:

1. Identify the six elements of an organization’s structure.

2. Describe the common organizational designs.

3. Compare and contrast the virtual and boundaryless organizations.

4. Demonstrate how organizational structures differ.

5. Analyze the behavioral implications of different organizational designs.

6. Show how globalization affects organizational structure.


What is Organization Structure?

• It defines how job tasks are formally divided, grouped, and coordinated

• Key elements to be addressed: Work specialization Departmentalization Chain of command Span of control Centralization Decentralization Formalization


Element 1: Work Specialization

• Also known as division of labor• Describes the degree to which

activities in the organization are subdivided into separate jobs

• Benefits: Greater efficiency and lower costs

• Costs: Human costs when carried too far Job enlargement as a solution

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Put about 100 bricks in some particular order in a closed room with an open window.Then send 2 or 3 candidates in the room and close the door.Leave them alone and come back after 6 hours and then analyze the situation.If they are counting the bricks. Put them in the accounts department.If they are recounting them.. Put them in auditing .If they have messed up the whole place with the bricks. Put them in engineering.If they are arranging the bricks in some strange order. Put them in planning.If they are throwing the bricks at each other. Put them in operations .If they are sleeping. Put them in security.If they have broken the bricks into pieces. Put them in information Technology.If they are sitting idle. Put them in human resources.If they say they have tried different combinations, yet not a brick hasbeen moved. Put them in sales.If they have already left for the day. Put them in marketing.If they are staring out of the Window. Put them on strategic planning.And then last but not leastIf they are talking to each other and not a single brick has been moved.Congratulate them and put them in top management.


Element 2: Departmentalization

• Basis by which jobs are grouped together so that common tasks can be coordinated

• Common bases: Function Product Geography Process Customer


Element 3: Chain of Command

Unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom

•Authority: positional rights•Unity of Command principle: one boss•Fewer organizations find this is relevant


Element 4: Span of Control

• The number of employees a manager is expected to effectively and efficiently direct

• Determines the number of levels and managers an organization has Trend is toward wider spans of control

Wider span depends on knowledgeable employees

Affects speed of communication and decision making


Element 5: Centralization and Decentralization

Centralization - degree to which decision making is concentrated at a

single point in the organization Only includes formal authority: positional rights Highly centralized when top managers make all

the decisions Decentralized when front line employees and

supervisors make decisions Trend is toward increased decentralization


Element 6: Formalization

Degree to which jobs within the

organization are standardized

Formal = minimum discretion over what is to be done, when it is done, and how

Informal = freedom to act is necessary


Common Organizational Designs

• Simple structure

• Bureaucracy• Matrix structure


Simple Structure

• Low degree of departmentalization• Wide spans of control• Authority centralized in a single

person• Little formalization• Difficult to maintain in anything

other than small organizations


Bureaucracy

• Highly routine operating tasks achieved through specialization

Formal rules and regulations

Centralized authority

Narrow spans of control

Tasks grouped by functional departments

Decision making follows the chain of command


Matrix Structure

• Combines two forms of departmentalization Functional Product

• Dual chain of command• Advantages:

Facilitates coordination and efficient allocation of specialists

• Disadvantages: Possible confusion, fosters power struggles,

stress


Matrix Structure for a Collegeof Business Administration

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Exercise

•Divide in groups of 5•Take any one organization•Describe the six key elements of organization structure•Analyse whether it is good for that oganization

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Copyright ©2010 Pearson Education, Inc. Publishing as Prentice Hall 14-1 Chapter 14 Foundations of Organizational Structure